High Court Asked If the Quill Physical-Presence Nexus Stand Applies to Other Than Sales or Use Taxes
A taxpayer has asked the U.S. Supreme Court whether the Quill physical-presence nexus standard applies to non-sales and use taxes, such as the Washington business and occupation (B&O) tax and, if so, whether such a physical presence was established by two or three visits per year by sales employees to existing customers in Washington. The taxpayer is a New Jersey manufacturer of insulation and vapor barriers with no permanent offices or agents in Washington. Two or three times a year during the tax period at issue, three of the company's sales employees visited major customers in Washington. During these visits, the employees did not solicit sales directly, but they answered questions and provided information about the company's products.
The taxpayer challenged Washington's assessment of B&O tax, arguing that it did not have a substantial nexus with the state. The Washington Supreme Court rejected this challenge, holding that the taxpayer's practice of sending sales representatives to meet with its customers within Washington was significantly associated with its ability to establish and maintain its market. The court noted that there is language in Quill, 504 U.S. 298 (1992), suggesting that the physical presence requirement should be restricted to sales and use taxes. However, it added that, to the extent there is a physical presence requirement outside the sales and use tax context, it can be satisfied by the presence of activities within the state that are substantial and associated with the company's ability to establish and maintain its market within the state.
Lamtec Corp. v. Washington Department of Revenue, U.S. Supreme Court, Dkt. 10-1289, petition for certiorari filed April 19, 2011